This case is based on a hypothetical company that was newly established for a mobile gaming app. Before the company was incorporated, an experienced game developer and “creative strategist,” Leon, and Lucas, a gaming influencer and streamer who was very popular in the Spanish-speaking world, had jointly created a game called sangre y acero®, meaning “Blood and Steel” in Spanish. Lucas’s name on his streaming channel on Twitch and YouTube was Rey de Acero®, meaning “King of Steel” in Spanish.
This game had passed most of the game-testing stages. A trademark had been obtained for the game’s name and logo. A copyright was also obtained for the game’s codes, art, music, scripts, and story and plot. These were the pre-incorporation events.
Later, Leon and Lucas contributed their sangre y acero® trademark and this copyrighted game to the incorporation of the company. Their friends contributed funds. A new company, SYA Inc., was formed on 1 January 2022. On 1 July 2022, the app was fully launched.
The purpose of the case is to have students prepare financial statements based on provided financial data, touching on a wide array of accounting concepts and common issues.
On completion of the case, students will be able to:
1. Understand and apply the basic accounting framework
2. Understand and apply the common accounting concepts and issues
3. Suggest the accounting treatment of pre-incorporation events, pre-operating events, and other operating events
4. Prepare an income statement, statement of financial position, and cash flow statement
5. Understand common revenue models for a mobile app
6. Evaluate the operating performance and cash flow performance of a startup